TV Apps: New Markets, New Revenue Possibilities

Consumers aged 18 to 34 have a greater likelihood of using video content from online sources and a lower likelihood of viewing broadcast television than do consumers in older age groups. Because of their unique viewing habits and preferences, younger consumers are of particular interest to the TV industry, making it likely that the trend to TV apps will continue well into the future.

The TV industry has been quick to move into the app market, and these offerings may foster a new era for television services.

The term "app" was initially coined for small applications that run on mobile devices and fulfill a particular purpose, but apps are now common to several platforms, notably on smart TVs and game consoles. A TV app is a software application that runs on a computing platform and either initiates or includes functions related to television programming or services.

Today's TV apps do not involve simply watching video but can provide new ways for content creators to tell stories, new avenues for consumers to interact with video content, and new ways for industries to monetize these interactions.

TV apps provide value to the consumer in several ways:

They provide access to live or on-demand television content.

They engage the viewer through supplemental content.

They enhance the viewing experience for the user.

Although a TV app is downloaded to and installed on a device, the app itself often accesses cloud-based features, providing benefits and features beyond the CE platform on which it is running.

App Platforms and Use Cases

Consumers have adopted apps on their mobile devices in astounding numbers, both in terms of the number of people using apps and the number of apps used. Parks Associates finds that 86 percent of U.S. smartphone owners use at least one smartphone app regularly. The most popular smartphone and tablet platforms, iOS and Android, rely heavily on app-based functions and an app-oriented interface that allows users to easily activate apps.

One of the notable benefits of the app-based interface is the ability for users to easily personalize the device interface. The interest in personalized experiences also led to the growth of app interfaces on smart TVs. The current generation of game consoles include apps for a variety of entertainment types beyond gaming, including music, video and socialization.

The most popular use for entertainment apps is media consumption, including games, videos, print media and music. Playing games is the most popular entertainment app on smartphones, tablets and game consoles: 63 percent, 46 percent and 50 percent of the users of these platforms, respectively, have a gaming app they use on at least a monthly basis.

The other popular use cases for entertainment involve passive consumption habits. Interestingly, regular app use actually drops as use cases become more interactive and require greater user input.

Each app platform has a unique set of advantages and constraints that can be observed in the apps that are most popular on each platform. Smart TVs, with a superior screen size, excel in video-related apps, and the most popular entertainment app on this platform involves watching videos. Of smart-TV app users, 43 percent use a video app on a monthly basis, while only 31 percent have a similarly used gaming app.

In general, interactive apps and non-video content uses are less popular on the smart TV platform, which is typically limited with a remote control interface.

Innovative Input Interfaces

Game- and video-related apps are also popular on game consoles. Since console makers closely control what content can be accessed via their platforms, other types of apps are underutilized or unavailable.

However, game-console manufacturers have been aggressive in developing innovative input interfaces. For example, the Xbox 360 and the Xbox One include controller, voice and motion input options. These technologies open new possibilities for users to interact with content, and that could expand app use cases on the platform beyond video and gaming.

Smartphones and tablets generally fulfill all-purpose roles. Consumers use smartphones for entertainment-related functions due to the platform's high portability, ubiquitous data access and omnipresence. Consumers generally have their phones with them at all times, which is why 26 percent regularly use an app to check movie show times and information.

Tablets are better suited for e-print-related applications such as books, magazines and newspapers due to their larger screen size. They are not used as much for more "immediate" functions such as checking movie show times (only 16 percent of users), but 35 percent regularly use an app to read a book, newspaper or magazine, compared with only 27 percent on a smartphone.

The common use cases of video viewing, information consumption and game play on all of these connected devices provide industry players with a potential path to drive TV-related content to the consumer.

TV Industry Response

Noting the increase in connected-device penetration and the use of apps across platforms, the TV industry has responded, launching a variety of TV-related apps over the past few years. Today, more than 55 percent of U.S. smartphone owners and 61 percent of tablet owners use a TV-related app at least once a month, according to Parks Associates consumer data.

Beyond accessing programs, available TV apps include remote-control apps, apps to check TV listings and apps to interact with TV content. Popular shows such as The Walking Dead and channels such as The Food Network have developed and promoted apps as significant complements to their content -- and with good reason. TV app use is highly generational, especially on mobile devices, and having a strong app presence is becoming increasingly important in capturing these high-value viewers.

TV apps can make the viewing experience simpler or richer. The most common uses for apps across all age groups relate to TV-related information.

New Partnerships

While many consumers use apps to review the TV listings in the program guide or seek information about a particular show, seeking information about products or services related to a program is the most popular use of TV-related apps across age groups, and on both smartphones and tablets. This finding is good news for advertisers and the TV industry as a whole, as it validates a new and developing revenue source in this early market.

Among generational groups, Millennials are most likely to use apps in general and are likewise more likely to use TV apps. In addition, consumers aged 18 to 34 have a greater likelihood of using video content from online sources and a lower likelihood of viewing broadcast television than do consumers in older age groups. Because of their unique viewing habits and preferences, younger consumers are of particular interest to the TV industry, making it likely that the trend to TV apps will continue well into the future.

Currently, there's not much viewing of programming via apps, but that will grow over time as more consumers become aware of the content available on various app platforms. That, in turn, will prompt new content and hardware partnerships involving app-related platforms.

Globally, the number of TV app users on smartphones will exceed 1 billion in 2017, while the number of tablet TV app users will approach 500 million. The sheer volume of users will prompt all players -- including pay TV and OTT providers and content owners -- to continue to experiment with multiple app business models in order to capture this new, interactive audience.

Brett Sappington is director of research and Glenn Hower is research analyst at
Parks Associates.